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On-Demand CRM Software Reaches The Enterprise

An Acuman Solutions Research Report Summary

On-demand CRM solutions, now most commonly referred to as Software as a Service (SaaS) CRM systems, are booming within the SMB (small and midsize business) market which welcome the ability to extend their normally scarce IT resources. However, opening the gates of the much larger and more lucrative enterprise market remains a challenge for most SaaS CRM software solutions. Fortune 500 and Global 1000 companies are traditionally much stronger in IT and are often more cautious about the ability of SaaS applications to meet their business and technical needs. However this caution is steadily giving way to adoption, and even appreciation.

In October of 2007, Kelton Research performed a survey to understand how larger enterprises view SaaS solutions. Kelton reached out to IT managers, marketers, CFOs, and other executives at Fortune 500 companies, non profits and government agencies. These participants shared information and insights regarding the level of SaaS adoption they expect to see within their organizations. The survey results were intriguing, providing a strong verification that executives at the largest companies, leading non profits and federal government agencies show increased regard for, and are devoting increasing funds to, on-demand CRM computing.

While SaaS business applications (formerly known as Application Service Providers or ASPs) emerged during the dot com bubble in the late 1990s, the industry reached a critical mass several years later thanks to the skyrocketing growth of as a pioneer of on-demand Customer Relationship Management (CRM) software. Competitors such as Netsuite, Oracle and RightNow followed with their own SaaS offerings (including Oracle’s version of Siebel’s popular on-premise CRM software), providing SaaS solutions further visibility in the CRM industry.

Why Large Enterprises Are Adopting SaaS

One of the more telling conclusions of’the research report is the confirmation that the largest enterprises are adopting SaaS for many of the same reasons as their smaller commercial counterparts. Clearly there is a collective realization of SaaS advantages:

Speed of Implementation

  • Performance pressures are accelerating deployment of technology that supports re-engineering and business process automation.
  • Business software implementations in large enterprises are traditionally delayed by months-long IT development cycles and competition for limited IT resources.
  • SaaS business applications are offering a remedy, speeding time to deployment while maintaining flexibility.

Lower Up front Costs

  • The majority of SaaS subscription models are based on the “per seat, per month” pricing model; software expenses are based on a low flat fee per month, per user. This means an enterprise with 100 users at an average of $80 per month for each person can launch SaaS solutions at a cost of about $8,000 per month, or $96,000 per year.
  • The SaaS pricing structure is finding increased favor with large enterprise organizations. On-premise software licensing fees, IT support costs, internal hosting, complex networking, and real estate costs show continued price escalation with no end in sight. SaaS is clearly a more attractive pricing approach for most organizations.

Improved Utilization of IT Resources

  • With On-Demand CRM implementations, the cost of scalability, hosting, reliability, security management, networking becomes the responsibility of the SaaS provider. This frees the enterprise from a host of IT and resource-management concerns.
  • While implementation of an effective cloud-based application still involves the collection of user requirements, SaaS solutions often come with best practice workflows and a tailorable user interface intended to satisfy initial user needs. This allows employees to quickly launch the software and provide feedback, which further directs the development efforts of IT resources toward satisfying an organization’s business priorities.
  • Enterprise IT Resources are no longer required to support and maintain a large, complex application. They can instead concentrate on company specific core competencies and more strategic IT projects.

Analyst Research Confirms This Trend

Most notable analysts attest to significant growth opportunities for SaaS in the enterprise sector:

  • Analyst firm Gartner estimates that SaaS accounted for just 5% to 6% of the enterprise software market in 2007. That number is expected to grow to 20% by 2011.
  • An April 2007 InformationWeek survey of 250 business executives (31% of whom were from enterprises that exceeded $1billlion in revenue) noted that: “…approximately three out of 10 companies use SaaS for one application or more. An additional 11% of companies plan to adopt SaaS sometime in the future. Twenty-three percent of companies report that SaaS is under consideration but no decision has been made.

SaaS Concerns At The Enterprise

Top concerns expressed by the executives surveyed by the research included the following.

  • Information Security and Data Protection – More than six in ten executives (62%) expressed concern about the security of sensitive data outside their firewalls.
  • Integration with Legacy Systems – Many executives are also anxious about their ability to quickly (47%) and easily (57%) integrate existing information sources with SaaS systems.
  • System Adoption – Almost four in 10 (38%) of the participants were concerned about ease-of-use for new applications. Rapid adoption by the users is a commonly cited critical need in gaining enterprise level adoption.

Enterprise SaaS Requirements

Comparison of the large enterprise respondents with the InformationWeek survey of a broader range of companies suggests that larger organizations find the following three issues of critical concern:

1. Information Security
2. Ease and Speed of Integration
3. User Adoption

  • More than six out of ten (62%) large enterprises were concerned about the security of sensitive data outside their firewalls. This compares to 48% concerned with data security in a survey of all organization sizes in the InformationWeek report.
  • 56% expressed concern about the ease of system integration, while 47% wonder about the ability to quickly integrate SaaS into their legacy systems. Again this compares to a range of 30% to 40% in the broader InformationWeek results.
  • Finally, larger organizations remain concerned about user adoption. 38% list “ease of use by new users” as a top concern when implementing SaaS. This suggests that the return on investment (ROI) for any large enterprise is very tightly linked to successful user adoption.

Overall, the large enterprises typically have large investments in their corporate billing, transaction and customer information systems; and they are therefore hesitant or cautious to discard these sources of data in order to rearchitect on a pure SaaS platform.

Enterprise Data Security

Enterprises with information systems that house sensitive data, such as financial services companies and government agencies, must even more carefully examine their data protection and compliance needs prior to choosing a SaaS vendor. As with all software applications, information security threats can originate from within or outside the organization. Numerous head-lining credit card companies which have “lost” large amounts of customer data can attest to this fact.

Not all data is created equal, which means experts must identify exactly what data is sensitive, and whether or not it is a combination of data together that poses a threat. Software manufacturers such as Oracle and SAP argue that a single-tenant architecture for SaaS applications makes it easier for large enterprises to make the decision to convert, believing that their data is safer as long as it is not commingled with that of other customers. argues that its multi-tenant architecture is secure and that the multi-tenant environment choice lowers the cost for the enterprise by keeping maintenance and upgrades consistent across all enterprises.

With Fortune 500 and large government entities, it appears a hybrid approach may be the best way to satisfy these high-stakes data security needs. An organization wishing to capture the benefits of SaaS yet protect some of its critical data and keep it on-premise will blend capabilities so that extremely sensitive data is stored within the firewalls of the enterprise while non-sensitive data is stored in the SaaS provider’s hosted facility. The two sets of data can then be seamlessly linked for presentation to the business user as needed.

Enterprise System Integration

SaaS solutions often work “right out of the box" for smaller organizations. However, larger enterprises generally have more complex business demands, including:

  • The need for 24 by 7 availability with no exclusion for “maintenance windows”
  • The desire to achieve process automation and business process re-engineering gains as part of a SaaS implementation
  • A continual technology refresh cycle which replaces on-premise systems and may need to replicate some of that system’s user interface in the new SaaS software
  • A well-thought out change management program for SaaS systems and their affects on downstream systems
  • Business continuity and disaster recovery programs that must be tested and proven when introducing SaaS into the corporate architecture
  • Data encryption to and from the SaaS providers data center

Reasons such as these emphasize why SaaS implementations are understandably more sophisticated at the enterprise.

Enterprise User Adoption

Mature organizations understand that their real ROI stands for Return on Implementation – a factor most influenced by rapid user adoption. By maximizing two common SaaS capabilities – an intuitive user interface (UI) and efficient system integration – enterprises are driving improved system adoption and increased ROI. In order to objectively understand how much benefit has been derived from SaaS projects, best-in-class organizations are routinely developing performance metrics that measure user adoption before and after the implementation.

Purchase Barriers No More

Most business executives felt confident they would not be held back by their IT or finance departments in getting approval to adopt or upgrade SaaS CRM software. Only 35% worried that IT would stand in their way, while even fewer (25%) shared concerns that their CFO would object. For the most part, executives didn’t consider subscription costs to be a gating factor either. Just over one in five (21%) predicted that subscription fees would be an issue compared to the old model of a one time, up front software license fee that depreciates over time. In fact, most executives saw distinct advantages to the on-demand subscription pricing model. As John Garing, CIO of the U.S. Defense Information Systems Agency, puts it, “There are stair steps in prices that are not reversible when you purchase software as an enterprise license. Once you get to a certain level of use that cost is forever.” 55% of the survey respondents plan to spend the same amount of money – if not more – on their SaaS solutions in the future.


Even though on-demand software deployments to large enterprises can differ considerably from the SMB implementations that constitute most current SaaS usage, the common advantages have been made clear among decision makers. In terms of cost savings, speed of implementation, ease of integration and improved user adoption, on-demand CRM benefits are impossible to ignore. SaaS can be a highly leveraged and effective IT solution for organizations of any size, though it is not generally an “out of the box” solution for large enterprises. With careful consideration and the proper planning, organizations from Fortune 500 to the federal government will be able to quickly capitalize upon the speed, decreased costs and reduced IT allocation and maintenance that are the hallmarks of Software as a Service.

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